Another $800 Million Mugging Is Too Much for DWP Ratepayers
- 30 Sep 2011
- Written by Jack Humphreville
NOT ENOUGH GREEN - As part of its 2010 Power Integrated Resource Plan (the “IRP”), our Department of Water and Power recommended the early phase out of the coal fired Navajo Generating Station, beginning in 2014, four to five years in advance of the SB 1368 mandated termination date of December 31, 2019.
However, this early phase out of Navajo is now projected to cost Ratepayers $800 million, an amount approximating the revenues of the entire Water System.
But this $800 million ticket needs to be reviewed in the context of the proposed increases in our water rates, our power rates, the Sewer Service Charge, and the stormwater fees.
Over the next five years, this quadruple assault on our wallets is anticipated to increase our rates by at least $2.25 billion per year, with the high probability that it will be considerably more once the super secretive stormwater plan sees the light of day.
In addition, our rates for these services over the following four years will escalate at an even greater rate, in large part because of the environmental mandates that require that 33% of our energy be from high cost renewable resources, the need to repair the water, power and sewer infrastructure, and the funding requirements associated with the many billions in capital expenditures associated with the build out of the County’s stormwater system.
We may also be subject to significant payments mandated under any Cap and Trade program mandated by the State of California, once estimated by DWP to be $700 million.
As for the Navajo Generating Station that is located 600 miles northeast of City Hall, this power plant will remain in full operation even if the DWP is able to terminate its relationship prior to 2019.
The ability to phase out of Navajo early will also require some fancy footwork since DWP is required by contract to purchase 477 megawatts of power until 2019.
And if DWP tries to sell 21.2% interest in the 2,250 megawatt Navajo Generating Station, it is complicated by the fact that the existing participants have a right of first refusal. This will put a serious damper on any third party interest, thereby lowering the net proceeds from any sale transaction.
Furthermore, any purchaser will be required to fund DWP’s 21.2% share of the $600 million (or more) expenditure associated with the Selected Catalytic Reduction scrubbing system.
And the net proceeds from any sale would more than likely be used to partially fund the construction of an even more expensive 500 megawatt combined cycle natural gas power plant, forcing DWP to borrow even more money to fund the shortfall. Needless to say, none of the proceeds would be used to pay down debt or improve the Power System’s infrastructure or reliability.
In any case, homeowners, renters, and employers are being slammed with ever increasing costs, putting a chill on our already depressed economy that is experiencing unemployment and underemployment rates in excess of 20%.
While the idea of the early phase out of the Arizona based Navajo Generating Station is appealing to the well funded and vocal environmental lobby, the Ratepayers do not have the extra green to pay for the early phase out of this low cost source of out of state electricity while at the same time funding the Power Reliability Program, the drive to 33% Renewable Energy, and the multibillion dollar quadruple assault on their wallets.
Tags: Navajo Generating Station, DWP, Department of Water and Power, water rates, power rates, storm water rates, increased rates
Vol 9 Issue 78
Pub: Sept 30, 2011